Question
Don's Autoparts fixes automobiles and motorcycles. Don struggles with accounting and requires your help to help him with his variance analysis with respect to Direct
Don's Autoparts fixes automobiles and motorcycles. Don struggles with accounting and requires your help to help him with his variance analysis with respect to Direct Materials. Don's annual standard motorcycle services are 1,000 motorcycles, which require 2.5kg of steel material. The standard price per kilogram of steel is $2/kg. At the end of the year, Don realized he actually used 3,000 kg of steel to fix 1,000 motor cycles and that cost him $1.50 per kilogram of steal. He knows there was a huge quantity variance, but would like your help to calculate the price variance for the year and tell Don whether it was favourable or unfavourable. Show all your work, including the relevant formulas for full marks.
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